As of January 1, 1981, the mental health coverage provided by Blue Cross and Blue Shield for federal workers and their dependents was significantly changed. The change was to increase the deductible for the high option plan from $100 to $150 and from $200 to $250 for the low option plan, combined with an increase in the coinsurance rate to 30% from 20% for the high option plan and from 25% to 35% for the low option plan. The focus of this research is to analyze the impact of this change in coverage on the treatment patterns and cost patterns of mental health service use by federal employees. The first two years of the study have focused on demand models based on summary measures of utilization (i.e. number of visits per year per person); the current research would construct demand models based on episodes of mental health treatment. Thus contracts with the mental health system (e.g. visits and inpatient days) would be separated into distinct episodes of care, these episodes would then be classified into different types of episodes based on clinical judgment and information from the claims records, and demand models for each type of episode would be estimated. In addition, the impact of the benefit change on the characteristics of the differentr episode types will be analyzed.